CPPIB Ekes Out Small Q2 Returns

Exchange rates leave a 0.6% performance, despite strong showing in Canadian-denominated returns.

Thanks to some exchange rate moves, the Canada Pension Plan Investment Board’s fiscal second quarter returns were positive but lackluster, as the now $368.3 billion fund returned a mere 0.6% in the period ended September 30.

The massive Canadian retirement organization’s five and 10-year net returns are still strong, at 12.1% and 9.1%, respectively.

Mark Machin, the board’s president and chief executive officer, said that despite the quarter’s “relatively flat” returns, its teams “performed well” using its investment strategy.

“Foreign currency exchange-rate declines relative to the Canadian dollar were the Fund’s main headwind during the quarter, offsetting strong local currency performance,” he said.

While trade tensions have increasingly weighed down the global economy, the fund, which held 8% of its assets in China, said the region could present more opportunities if the price of its assets dropped.

“The thing for us is to be patient and look for good opportunities that are arising as a result of market stress and economic stress,” he told Reuters. “I think we’ll find very interesting opportunities in China over time as this continues.”

Although the fund only grew $1.7 billion in assets ($2.3 billion in net income), it has increased by $12.2 billion in the first half of fiscal 2019, returning 2.5% for that timeframe.

The board’s asset mix for the quarter was 36% public equities, 23.8% real assets, 22.1% government bonds, 21.8% private equity, and 7.7% credit. The allocation structure also contained negative balances in its external debt issuance (down 7%) and cash and absolute return strategies (off 5.1%), which were financed through derivatives and repurchase agreements.

Tags: , ,